Archives: Quiz

Refer to Figure 8.9. Which point of the LAC represents diseconomies of scale? A) a B) b C) c D) e Assume that the price of a DVD player is $50. If Joshua is willing to pay $50 for that […]

Suppose that the price of a coffee mug is $2. Lee’s marginal cost of producing coffee mugs $0.50 for the first mug, Tammy’s marginal cost of producing coffee mugs is $1 for the second mug, Stan’s marginal cost of producing […]

How can an increase in the minimum-wage affect the restaurant industry? A) It can create a shortage of restaurant workers. B) It can lead to an increase in prices for restaurant meals. C) It can create a surplus of restaurant […]

In Figure 2.3, an efficient production point on production possibility curve YZ is: A) point A. B) point B. C) point C. D) none of the above. An external cost of production is: A) a cost incurred by someone other […]

The firm depicted in Table 2.4 is likely to face diminishing returns because: Table 2.4 A) the amount of fertilizer can only be increased to 5. B) land and fertilizer are both fixed. C) land and fertilizer are both variable. […]

In the Iowa Gambling Task, scientists have found that on average, subjects are able to articulate why they stopped drawing cards from unfavorable decks after drawing: A) 5 cards. B) 10 cards. C) 50 cards. D) 60 cards. Julianne runs […]

Refer to Figure 12.8. If both firms follow their dominant strategies, Firm A will earn profits equal to: A) $500. B) $700. C) $200. D) $100. Suppose that people expect that the price of orange juice will rise next month. […]

Refer to Table 12.2. Jeri and Tom are arrested for having committed a crime. They are being interrogated individually and need to decide if they should confess or not confess. The police have enough information to put them in jail […]

Assume that Lorex is the only pharmaceutical company that has a patent in producing Lipitor for cholesterol. Lorex can make a profit by selling Lipitor: A) in the short run but not in the long run because new firms will […]

Diseconomies of scale can occur for: A) coordination problems. B) minimum efficient scale problems. C) increasing input costs. D) A and C are correct. What was the mistake that the governments the U.K. and France make when they subsidized the […]

Refer to Figure 9.6. At a market price of $20, this perfectly competitive profit maximizing firm should produce approximately ________ units. A) 30 B) 35 C) 40 D) 45 Refer to Figure 18.1. Mutually beneficial terms of trade between the […]

The short-run labor demand curve is: A) more elastic than the long-run labor demand curve. B) less elastic than the long-run labor demand curve. C) either more or less elastic than the long-run labor demand curve. D) perfectly elastic (horizontal). […]

Which of the following would be typically classified as a public good? A) postal delivery B) national defense C) toll roads D) college education Tie-in sales: A) are legal under the Clayton Act. B) are the same as predatory pricing. […]

A perfectly elastic demand curve is shown as a: A) horizontal line. B) vertical line. C) positively sloped line. D) negatively sloped line. When computing percentage changes, using the simple approach results in increases and decreases which are: A) identical. […]

Recall the application regarding opening a Dunkin’ Donuts shop and the small barriers to entering the donut business. What should an owner of a Dunkin’ Donut shop expect in a monopolistically competitive market? A) total revenue equal to total cost […]

On the production possibilities curve in Figure 2.1 the gain from decreasing manufacturing production from 700 tons to 500 tons is: Figure 2.1 A) 700 tons of agriculture. B) 500 tons of agriculture. C) 200 tons of agriculture. D) 100 […]

Which of the following products has elastic demand? A) water B) coffee C) cars D) all ice cream As firms enter a monopolistically competitive market in the long run: A) price increases, the market quantity demanded increases, and the quantity […]

According to this Application, after the government deceased cigarette taxes in several Canadian provinces in 1994, the decrease in the price of cigarettes in these provinces: A) more than doubled the smoking rate. B) created no noticeable change in the […]

A Major League Baseball player signs a contract that pays $27 million over 5 years. The $27 million is the contract’s ________ value. A) real B) implicit C) external D) nominal The word “monopolistic” in the label “monopolistic competition” refers […]

Daily Output of Scotland and Poland Table 18.1 Refer to Table 18.1. Scotland has a comparative advantage in: A) accordions. B) bagpipes. C) both accordions and bagpipes. D) neither accordions nor bagpipes. Lemon laws that allow consumers to return low-quality […]

An inferior good is defined as a good for which demand decreases when: A) the price increases. B) income increases. C) the price decreases. D) income decreases. Recall the Application. The federal government marketing order that helped reduce asymmetric information […]

Which of the following is an example of a marginal question? A) How much will my chances of finding a job improve if I raise my GPA from a C to a C+ grade average? B) What is the average […]

An increase in the minimum wage will have a large effect on the number of workers employed in minimum wage occupations if: A) demand for workers is elastic. B) demand for workers is inelastic. C) supply of workers is elastic. […]

The type of product sold is what differentiates oligopoly markets from the other three market structure types (perfect competition, monopoly, and monopolistic competition). Economists will never reach the same conclusions in their positive analyses. Answer: FALSE The marginal cost curve […]

Oligopolies are characterized by many firms. In an oligopolistic market, the government may limit the number of firms in a market by issuing patents. Answer: TRUE Monopolistically competitive firms tend to operate on the positively sloped portion of their average […]

The marginal benefit of someone’s search depends on her/his discovered price. Information goods such as a music video have an L-shaped average cost curve. Answer: TRUE If marginal utility is positive consuming an additional unit of a product will cause […]

Scarcity is a situation in which resources are limited in quantity and can be used in different ways. The long-run supply curve can be used to determine the long-run price after an increase in demand. Answer: TRUE Free trade will […]

Neuron activity in the insula represents the benefit of buying a product. Utility is not easy to measure and quantify. Answer: TRUE Oligopoly arises with scale economies that are not large enough to cause a natural monopoly. Answer: TRUE In […]

Private goods can have external benefits. Labor skills are determined by innate ability, education and work experience. Answer: TRUE A maximum price below the market equilibrium price will raise the total surplus of the market. Answer: FALSE The main purpose […]

The equimarginal rule says that a person will maximize utility by choosing the good for which the marginal utility is the greatest. The long-run supply curve for a increasing cost industry is downward sloping. Answer: FALSE Suppose that the price […]

A monopolistically competitive firm maximizes profit by producing where marginal revenue is less than marginal cost. In order to get his bachelor’s degree, Timothy gave up an offer for a full time job as a bartender. Therefore, Timothy incurred an […]

Diminishing marginal returns occur only in the long run. Average fixed costs rise continuously as the quantity of output rises. Answer: FALSE A good is nonrival in consumption if it is not practical to exclude people who don’t pay for […]

Entry leads reduces firm profits because it leads to a lower price. The earned income tax credit has been a successful anti-poverty policy by encouraging participation in the workforce. Answer: TRUE The firm faces the market demand curve in a […]

A workplace externality benefits fellow workers. The current means of regulating automobile emissions is “command-and-control.” Answer: TRUE Specialization in production will increase total output. Answer: TRUE If the price elasticity of demand is .5 and the price elasticity of supply […]

A decrease in the cost of production will shift the supply curve down and to the right. If the marginal cost is increasing over a given output range, the average total cost must increase. Answer: FALSE The principles of comparative […]

If the price elasticity of supply of CDs is 0.8, then the supply is inelastic. If the price elasticity of demand for peanuts is 0.4, then the demand is inelastic. Answer: TRUE Recall Application 2, “The Market for Meteorites,” to […]

If Eddie can produce 40 milk shakes or 20 banana splits in an hour, and Tina can produce 30 milk shakes or 16 banana splits in an hour, then Eddie has a comparative advantage in producing milk shakes. If Xerox […]

A construction laborer might make more than a similarly skilled book store clerk because the working conditions in the book store are more desirable. The Justice Department will not allow firms to merge if the result will be higher prices […]

In the prisoners’ dilemma the prisoners are allowed to communicate. A change in the price of a product will change the supply of that product. Answer: FALSE Governments occasionally get involved in creating a market equilibrium by setting a maximum […]

A minimum wage above the equilibrium wage leads to an excess quantity supplied of labor. The government uses the buying power of wages rather than face value or nominal value in reporting changes in “real wages” in the economy. Answer: […]

Trade will be beneficial for a nation with a comparative advantage in producing a certain product. Accounting costs include all monetary payments and all the opportunity cost of inputs that do not require an explicit monetary payment. Answer: FALSE A […]

An increase in demand will lead to a decrease in supply in the long run. Higher wages could lead workers to choose to work less hours. Answer: TRUE The price elasticity of supply is generally greater than zero. Answer: TRUE […]

A switch to marketable pollution permits will decrease abatement costs because high-cost firms do most of the abating. A contestable market is one where there are few if any barriers to entry. Answer: TRUE Monopolistic competition is characterized by barriers […]

All goods that generate external benefits are public goods. A private good with external benefits is a public good. Answer: FALSE A monopolistically competitive firm influences market price by virtue of its size. Answer: FALSE People will buy more of […]

If John drives more recklessly because he has good automobile insurance it is an example of moral hazard. The implementation of TANF helped reduce the number of people on welfare. Answer: TRUE In a grim trigger strategy, a firm responds […]

Monopoly reduces market efficiency compared to perfect competition. Due to crime externalities, a more educated society tends to have a lower level of crime. Answer: TRUE In the short run a manufacturing firm’s production equipment is a sunk cost. Answer: […]

A natural monopoly is inevitable if the entry of a second firm shifts the demand curve facing each individual firm entirely below the average cost curve. When there is imperfect information, a role of government is to disseminate information and […]

The protection of the earth’s ozone layer is an example of a public good. If the opportunity cost of 1 wristwatch is 4 wall clocks in Japan and 2 wall clocks in Germany, it makes sense for Japan to produce […]

Increased international trade results in greater incomes for low-skilled workers. The poverty rate in the United States is lowest for whites. Answer: FALSE A dominant strategy is one that is the best choice regardless of other firms’ decisions. Answer: TRUE […]

A product produced in the home country and sold in another country is an export. As an individual consumes more of a good, total utility increases and marginal utility decreases. Answer: FALSE The house slipper industry is an example of […]